1. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Chapter 10 Organizational Behavior Nelson & Quick, 6 th edition Decision Making by Individuals and Groups

2. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved The Decision-Making Process Programmed Decision - Programmed Decision - a simple, routine matter for which a manager has an established decision rule Nonprogrammed Decision - Nonprogrammed Decision - a new, complex decision that requires a creative solution

3. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved The Decision- Making Process Recognize the problem and the need for a decision List and evaluate alternatives Gather and evaluate data and diagnose the situation Identify the objective of the decision

4. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved The Decision- Making Process Select the best course of action Implement the decision Gather feedback Follow up

5. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Models of Decision-Making Effective Decision - Effective Decision - a timely decision that meets a desired objective and is acceptable to those individuals affected by it Photos courtesy of Clips Online ©2008 Microsoft Corporation

6. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved 1. The outcome will be completely rational 2. The decision maker uses a consistent system of preferences to choose the best alternative 3. The decision maker is aware of all alternatives 4. The decision maker can calculate the probability of success for each alternative Rationality - Rationality - a logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences Rational Model

7. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Managers suggest the first satisfactory alternative Bounded Rationality - Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be Satisfice – Satisfice – to select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize Bounded Rationality Model

8. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Managers recognize that their conception of the world is simple Managers are comfortable making decisions without determining all the alternatives Bounded Rationality Model Managers make decisions by rules of thumb or heuristics Heuristics – Heuristics – shortcuts in decision making that save mental activity

9. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Garbage Can Model Garbage Can Model - a theory that contends that decisions in organizations are random and unsystematic SOURCE: From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) 1-25. Reprinted by permission of the Administrative Science Quarterly Problems Participants Solutions Choice opportunities

10. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Risk and the Manager Risk Aversion - Risk Aversion - the tendency to choose options that entail fewer risks and less uncertainty Risk takers –Accept greater potential for loss –Tolerate greater uncertainty –More likely to make risky decisions –Often lead the group discussions Evidence: Successful Managers Take Risks

11. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Escalation of Commitment - Escalation of Commitment - The tendency to continue to commit resources to a failing course of action Why it occurs –humans dislike inconsistency –optimism –control –sunk costs How to deal with it –split responsibility for decisions –provide individuals with a graceful exit –have groups make the initial decision Escalation of Commitment

12. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Influences on Decision-Making Intuition - Intuition - fast, positive force in decision making utilized at a level below consciousness and involves learned patterns of information Creativity - Creativity - a process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both

13. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Four Stages of the Creative Process Illumination insight into solving a problem Verification thinking, sharing, testing the decision Incubation reflective thought, often unconscious Preparation experience/ opportunity to build knowledge base

14. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Influences on Creativity Individual examples –Cognitive Processes Divergent thinking Associational abilities Unconscious processes –Personality Factors Intellectual, artistic values Breadth of interests High energy Self-confidence Organizational examples –Autonomous feelings –Diverse team skills –Quality, supportive relationships with supervisors –Flexible organization structure –Participative decision making

15. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Participative Decision Making - Participative Decision Making - Individuals who are affected by decisions influence the making of those decisions Participation in Decision Making Photos courtesy of Clips Online ©2008 Microsoft Corporation

16. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Organizational Foundations –Participative, supportive organizational culture –Team-oriented work design Individual Prerequisites –Capability to become psychologically involved in participative activities –Motivation to act autonomously –Capacity to see the relevance of participation for one’s own well-being Foundations for Participation and Empowerment

17. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Group Decision-Making synergy -Role of synergy - a positive force that occurs in groups when group members stimulate new solutions to problems through the process of mutual influence and encouragement in the group social decision schemes -Role of social decision schemes - simple rules used to determine final group decisions Majority Wins Truth Wins Two-thirds Majority First-shift

18. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Group Decision Making 1. More knowledge through pooling of group member resources 2. Increased acceptance and commit- ment to decisions (had a voice) 3. Greater understanding due to involvement in decision stages 1. Pressure in groups to conform 2. Domination by one forceful member or dominant clique 3. Amount of time required, because group is slower than individual to make a decision AdvantagesDisadvantages

19. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Group Phenomenon Groupthink - Groupthink - a deterioration of mental efficiency, reality testing, and moral judgment resulting from in-group pressures Photos courtesy of Clips Online ©2008 Microsoft Corporation

20. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Conditions Favoring Groupthink High cohesiveness Group homogeneity Decision with high consequences Time constraints Photos courtesy of Clips Online ©2008 Microsoft Corporation

21. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Symptoms of Groupthink Illusions of invulnerability Illusions of group morality Illusions of unanimity Rationalization Stereotyping the enemy Self-censorship Peer pressure Mindguards SOURCE: Irving L Janis, Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright © 1982 by Houghton Mifflin Company. Used with permission. Photos courtesy of Clips Online ©2008 Microsoft Corporation

22. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Preventing Groupthink Ask each group member to act as critical evaluator Have the leader avoid stating his opinion prior to the group decision Create several groups to work simultaneously Appoint a devil’s advocate Evaluate the competition carefully After consensus, encourage rethinking the position SOURCE: Irving L Janis, Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright © 1982 by Houghton Mifflin Company. Used with permission.

23. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Group Polarization Group Polarization - Group Polarization - the tendency for group discussion to produce shifts toward more extreme attitudes among members Photos courtesy of Clips Online ©2008 Microsoft Corporation

24. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Group Decision Making Techniques G Nominal Group Technique (NGT) Devil’s Advocacy Dialectical Inquiry Quality Circles and Quality Teams Group Decision Techniques Brainstorming Delphi Technique Self-Managed Teams

25. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Diversity and Culture in Decision Making Racially dissimilar groups –More open information sharing –Dissenting perspectives encouraged –Better decision making Functionally dissimilar groups –Engage in greater debate –Better financial performance $ $ $ Photos courtesy of Clips Online ©2008 Microsoft Corporation

26. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Technological Aids to Decision-Making Technological Aids to Decision-Making Expert Systems - Expert Systems - a programmed decision tool set up using decision rules Decision Support Systems - Decision Support Systems - computer and communication systems that process incoming data and synthesize pertinent information Group Decision Support Systems - Group Decision Support Systems - systems that use computer software and communication facilities to support group decision-making processes (face-to-face meetings or dispersed)

27. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Is it legal? –Does it violate law –Does it violate company policy Is it balanced? –Is it fair to all –Does it promote win-win relationships How will it make me feel about myself? Ethics Check Ethics Check

28. Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Chapter 10: Reflect & Discuss Dr. Seuss’ How the Grinch Stole Christmas Video Clip What to Watch for and Ask Yourself What are the Grinch’s decision alternatives or options? What decision criteria does the Grinch use to choose from the alternatives? Describe the steps in the Grinch’s decision- making process.